Non-cash transaction incentive and commission distribution system

ABSTRACT

An electronic fund transfer system is disclosed wherein commissions for point-of-sale purchase transactions are determined and distributed to members of an organizational network for promoting use of a non-cash payment device for effecting purchase transactions. Purchase data is electronically transmitted from the point-of-sale to an automated clearing house for effecting fund transfers to prepare the purchase, and also to a commission management system. The commission management system maintains an electronic database reflecting the structure of the organizational network, and further determines the distribution of purchase commissions according to a predetermined schedule of proportions relating to the position and business volume of each member of the network. The commission management system further comprises a payment processor for effecting commission payments to the members or to a designated sponsor on a scheduled basis.

FIELD OF THE INVENTION

The present invention relates to non-cash point-of-sale transactionsystems for managing purchase transactions and for distributing ofpurchase commissions among distributors and users of non-cashpoint-of-sale transaction systems.

BACKGROUND OF THE INVENTION

Non-cash payment devices, such as debit cards or credit cards, providesubstantial convenience to purchasers of goods or services. However,such payment devices require electronic transaction management andaccounting systems which incur operating expenses above the cost ofgoods and services purchased with such devices. Traditionally, issuersof non-cash payment devices have entered into merchant agreementswhereby participating merchants pay commissions to the card issuers inexchange for providing customers with the convenience of using non-cashpayment devices. More recently, competition among card issuers hasdecreased the commission rates that merchants are willing to pay.Consequently, card issuers have attempted to increase the transactionvolume by providing various incentives to their customers and byaggressive commercial promotion of such incentives.

In one known incentive program, such as described in U.S. Pat. No.4,941,090 to McCarthy, customers are paid personal bonuses based uponthe amount of personal purchases made with their non-cash paymentdevice. Although such an incentive program is attractive to individualcustomers, such a program must also be effectively promoted to advertisethe program and to attract potential customers. Additionally, theseincentive programs provides no particular advantage to the participatingmerchants, who must still be enrolled on a commission basis competitivewith other non-cash payment systems. It would therefore be desirable todevelop a non-cash payment system that provides incentives for consumersto use the system in preference to other non-cash payment systems, thatwould provide enrollment incentives to merchants, and would reducepromotional costs associated with attracting and maintainingcardholders.

SUMMARY OF THE INVENTION

In accordance with the present invention, a commission payment andaccounting system organizes transaction data pertaining to holders of anon-cash payment device, such as a debit card or credit card, into ahierarchical database reflecting the organizational structure of anincentive program for using the debit cards and for enlisting newcardholders. Commissions on purchases are electronically transferred tothe card issuer, and the commission payment and accounting system isconfigured to determine and dispense commission payments to cardholdersaccording to the stored electronic funds transaction data, theorganizational relationships among cardholders, and a predeterminedschedule associating proportional commission rates with definedorganizational relationships.

BRIEF DESCRIPTION OF THE DRAWING

The foregoing summary, as well as the following detailed description,will best be understood in conjunction with the attached drawing inwhich:

FIG. 1 is a functional block diagram of a transaction system accordingto a preferred embodiment of the invention;

FIG. 2 is a block diagram of an electronic data record maintained in acommission accounting and payment database of the transaction system ofFIG. 1; and

FIG. 3 is a structural diagram of the organization of electronic datarecords in the commission accounting and payment data base.

DETAILED DESCRIPTION OF THE INVENTION

Referring now to FIG. 1, there is shown an exemplary non-cash paymentand commission system according to the invention. The system is adaptedfor managing purchases of goods or services by members (i.e. persons ordistributors) of a network marketing, or multilevel marketingorganization, and for managing payment of commissions to members of theorganization according to a hierarchical commission accounting andpayment method. As described further hereinbelow, each member isprovided with. a non-cash payment device 9, such as a debit or creditcard for making purchases at any of a plurality of merchant locations,of which merchant location 10 is exemplary. The debit or credit cardincludes means for encoding member information thereon, such as bymagnetically encoding an account number of the member on a magneticstripe. By prior arrangement with the network marketing organization,the proprietor of each merchant location agrees to provide a discountfor each purchase of goods or services by the member as a proportion ofthe purchase price of such goods or services, or as a fixed amount perpurchase. In addition, in exchange for providing the discount or inconsideration for a further discount, the merchant may be provided withopportunities to market its goods or services to the members of theorganization, such as by direct mail.

A point-of-sale purchase processing terminal 12 (PPT) is located atlocation 10. The location may comprise a retail site or an operatortaking orders by phone for a catalog or a computer site being used tosell products through a network.

The purchase processing terminal 12 is of a known type including dataentry means, such as a keyboard 12 a and a magnetic stripe reader 12 b,for acquiring data pertaining to a purchase; a digital memory (notshown) for temporarily storing purchase data; and an electroniccommunication interface, such as a modem 12 c, for communicatingpurchase data and for receiving an authorization signal pursuant to apurchase.

When a member desires to make a purchase in connection with location 10,the member provides his or her debit card for entering the member'saccount number into the memory of the purchase processing terminal 12via the magnetic stripe reader 12 b. The amount of the purchase isentered into the memory of the POS terminal via the keyboard 12 a (orother data entry means, such as a barcode scanner). The terminal 12 isthen operative to activate the electronic communication interface 12 cto establish an electronic data connection 13 with a debit authorizationand transaction processor 14. In embodiments wherein the communicationinterface 12 c comprises a modem, the data connection 14 may be atelephonic connection. In other embodiments, alternative known methodsof electronic data transmission may be employed to establish the dataconnection 13. The purchase processing terminal 12 is operative totransmit purchase data, including the member account number, the amountof the purchase, and the identity of the merchant, to the authorizationand transaction processor 14. The processor 14 is preferably located ata remote location relative to the respective merchant locations, and isfurther configured to establish electronic data connections with each ofthe merchant locations. The processor 14 is operative for receivingpurchase data and for determining, for each purchase, whether to issuean authorization signal in response to the received purchase data. Sucha determination may be made, for example, on the basis of risk datamaintained by the processor 14 and relating to the members, forassessing whether there is an acceptably low risk of default on theamount of the purchase. Alternatively, the authorization processor maymake such a determination by obtaining access to a member's debitaccount balance.

If the proposed purchase is approved, the authorization processor 14transmits an electronic authorization signal along the data connection13 to the purchase processing terminal 12 at the merchant location 10.The purchase processing terminal 12 in turn, signifies receipt of theauthorization signal for the member to make the purchase.

When a purchase is approved by the processor 14, the processor 14 thenestablishes a data connection 16 with an automated clearing house (ACH)processor 17. The ACH processor 17 is preferably established at a remotelocation relative to the authorization processor 14. The ACH processor17 is further connected with an electronic funds transfer network 18 foreffecting electronic transfers of funds among a merchant account 20, amember account 21, and an organization account 22. For each purchase,the authorization processor 14 instructs the ACH processor 17 to effectthe following electronic fund transfers: a debit to the member account21 in the amount of the purchase, a credit to the merchant account 20 inthe amount of the purchase, a debit to the merchant account 20 in theamount of the discount or fixed amount, and a credit to the organizationaccount 22 in the amount of the discount or fixed amount. For example,for a $20 purchase at a merchant having a discount rate of 10%, therewill be a debit of $20 charged to the member account 21, a credit of $20paid to the merchant account 20, and a debit of $2 charged to themerchant account 20, and a credit of $2 paid to the organization account22.

In addition to instructing the ACH processor 17 to effect transfers offunds, the authorization processor 14 is configured to transmit purchasedata to a commission management system 26 maintained by the networkmarketing organization. The commission management system 26 comprises acommission management processor 27, an electronic database 28 forstoring member data and structural data pertaining to the organizationalstructure of the organization, and a payment processor 29, such as anautomated printing and mailing facility, for effecting payment tomembers. The member data and structural data are stored in the database28 in the form of a plurality of member records, such as member record30 shown in FIG. 2. The database 28 is preferably implemented as astructured electronic database in a form compatible with a non-volatilemass data storage device, such as a magnetic disk or tape or other knownelectronic data storage device B.

The member record 30 includes a plurality of data fields, such as anaccount number field 32 for storing an account number, a memberidentification field 34 for storing identifying data pertaining to amember (such as the member's name, address, etc.), a Personal BusinessVolume field 36 for storing a record of purchase discounts, or a portionthereof, attributable to the member's use of the debit card, and ahierarchy position data field 38 for storing data identifying themember's location in a commission distribution hierarchy. Such hierarchyposition data may include, for example, pointers to locations within themass data storage device of records of other members that aresubordinate to the member within the hierarchy, as described furtherhereinbelow.

When the authorization processor 14 transmits purchase data to thecommission management system processor 27, the commission managementprocessor 27 associates the received member account number with acorresponding member record stored in the database 281. Then thecommission management system retrieves the contents of the correspondingPersonal Business Volume field 36, adds the incoming purchase discountamount to the retrieved Personal Business Volume, and then stores thenew value of the member's Personal Business Volume in the member'srecord 30 in the database 28.

A structural diagram of relationships among member records within anexemplary database 28 is shown relative to a representative Member A inFIG. 3. The sub-structure comprising the records of Members B-H shall bereferred to herein as Member A's “downline network.” Relationshipswithin the database 281 are established as follows. When Member Arecruits new members to the organization, such new members areestablished at positions directly subordinate to Member A in thehierarchy. Such new members, for example Members B and C, would indicatethe fact of their recruitment by Member A on respective applicationforms for memberships, or recruitment and placement by an uplinesponsor. Established members in the hierarchy are entitled to recruitnew members, such that successive generations of members will beestablished to constitute Member A's downline network.

In order to provide an incentive for recruitment of new members and anincentive for members to use the debit card, commissions are paid out ofthe accumulated discount credits in the organization account 22.Preferably, the commissions are paid out at regular intervals, such asweekly, monthly, semi-annually, or annually. In a particularly preferredembodiment, the commissions are paid at monthly intervals. Each member'scommission is determined by the commission management processor 27according to the net Personal Business Volume of the members in his- orher downline network. For example, a member's commission may comprise aspecified proportion of the net Personal Business Volume of the memberson successive levels of his or her downline network in accordance with aschedule 40 associating each successive level of the downline networkwith a selected proportion for that level. Such a schedule 40 is shownin FIG. 3 adjacent to the exemplary hierarchy. In accordance with theschedule 401 Member A will receive a commission proportional to 2% ofthe Personal Business Volume of Members B and C, 3% of the PersonalBusiness Volume of Members D, E, and F, and 20% of the Personal BusinessVolume of members G and H, for a total of $33.50. The schedule ofproportions 40 is maintained by the commission management system 26 forreference in computing commissions owed to each of the members at thespecified interval A.

As can be appreciated, a variety of commission schedules or multilevelpayment plans may be employed in order to optimize the incentives amongthe members to use the debit cards and to recruit new members. Furtherfeatures of the commission management system 26 may be developed toenhance such incentives. As a further incentive to promote use of thedebit cards, the payment of commissions can be conditioned onachievement of a specified level of Personal Business Volume to qualifya member for receipt of commissions from successive levels of thatmember's downline network, according to a graduated scale ofqualification threshold values. In the example of FIG. 3, Member A wouldbe required to accumulate $50 of Personal Business Volume in order toqualify for receipt of commissions from the first three levels of his orher downline network, $100 to qualify for the fourth through sixthlevels, and $200 to qualify for the seventh and eighth levels. Inalternative embodiments, a member's Personal Business Volume can providea basis for computing a proportional factor for use in combination withthe level-dependent schedule 40 of proportions employed to compute thatmember's commission.

After the commission management processor 27 has determined a commissionto be paid to a member, the member identification data and the amount ofthe commission are transmitted to a payment processor subsystem 29. In apreferred embodiment, the payment processor subsystem 29 comprises anautomated printer/mailer for printing a commission check to be mailed tothe member. In an alternative embodiment, the payment processorsubsystem 29 may effect an electronic find transfer of the commissionamount from the organization account 22 to the member account 21, andprint a statement for mailing to the member.

The incentives among the members to use their non-cash payment devicesand to recruit new members, may also be used to recruit merchants toparticipate in entering into discount agreements with the organization.Because the members of the organization would be motivated to use theorganization's payment vehicle in preference to other payment vehicles,and since the members would also be desirous of achieving the requisitePersonal Business Volume to qualify for increased commissions, themembers are more likely to make purchases with merchant participants. Tofacilitate this incentive, the merchant can be provided with limitedaccess to the organization's database for marketing purposes. Forexample, aggregate purchase data relating to categories of goodspurchased by each member can be maintained by the commission managementsystem in order to allow the merchant to achieve greater promotionalefficiency by targeting his or her marketing material to particularlyreceptive members within the already motivated membership of theorganization. Hence, by entering into a discount agreement with theorganization, the merchant can also obtain increased marketingefficiency by directing promotional material to an audience that isreadily motivated to make purchases from the merchant. For example, therelative frequency with which members purchase sporting goods would bevaluable information to a sporting goods merchant desirous of directinghis or her promotional material toward motivated consumers of sportinggoods. The degree of marketing support provided to the merchant can bemade contingent on the magnitude of the discount offered by themerchant.

The terms employed hereinabove are terms of description, not limitation,and the scope of the invention is intended to be defined by thefollowing claims and equivalents thereunder. As can be appreciated, theinvention is susceptible to variation within the skill of thoseknowledgeable in the pertinent art. For example, the practice of theinvention may be extended to other non-cash payment devices. In such avariation, the term “discount” as used herein would be equallyapplicable to denote a premium paid by the merchant for conducting apurchase transaction, as well as a discount applied by the merchant tothe purchase price. Similarly, the “debit account” of the member would,in such a variation, be applicable to a credit balance to be billed tothe member on a basis separate from, or concurrent with, the payment ofcommissions.

In an alternative embodiment, accumulated commissions may be paid to anaccount 23 other than the member account 21. For example, thecommissions may be paid on behalf of a member to a designated account 23of a sponsoring organization, such as a charity, union, or fraternalorganization, which has arranged to sponsor use of the device, or whichhas been designated by the member. Similarly, the commissions may bepaid on behalf of a majority of or even all of the members to adesignated account 23 of a specific sponsoring organization.

In an alternative embodiment, the merchant “location” 10 can be aninternet web server capable of processing e-commerce transactions. Insuch an embodiment, the “point-of-sale” processing terminal 12 would bea remote computer by which a user may connect to the merchant site,select merchandise, and enter appropriate purchase information. Suchinformation would then be relayed to an authorization processor 14, suchthat the payment device would function as herein otherwise described,with the functions of the processing terminal 12 distributed among themerchant web server and the user's computer or other device capable ofestablishing a connection to the internet 13 a, such as a personaldigital assistant or digital cellular telephone. The merchant locationmay further comprise a web site depicting internet merchants, such as aninternet mall which is capable of processing e-commerce transactions.

The merchant location may further comprise a web site depicting internetmerchants, such as an internet mall which is capable of processinge-commerce transactions.

The merchant server may further comprise a centralized “front end”processor for a plurality of merchants, and/or may relay purchase datato a centralized acceptance or authorization processor serving aplurality of merchants. Operation of the purchase processing terminalwould proceed by having the user establish an internet connection to themerchant server, entering the purchase data, and then transmitting thepurchase data to an authorization processor.

1. A method of distributing commissions to promote use of a non-cashpayment device, comprising the steps of: organizing an electronicdatabase to contain member records, each member record identifying abearer of the non-cash payment device; establishing a hierarchy ofrelationships among the member records, and storing positional data inthe electronic database in association with the member records;operating a purchase processing terminal to record a purchase by one ofthe members bearing the non-cash payment device; electronicallytransmitting transaction data from the purchase processing terminal to acommission management processor connected with the electronic database;operating the commission management processor to determine, on the basisof the transaction data, a business volume value, and to record thebusiness volume value in a member record identifying said one member;determining a commission value for said one member on the basis ofbusiness volume values recorded in other member records and on the basisof the positional data relating said one member with the other membersin the hierarchy; and effecting a monetary payment in the amount of thecommission value on behalf of one member to a designated sponsor.
 2. Themethod of claim 1, wherein said establishing step comprises establishingsuccessive subordinate levels of member records relative to said onemember within the hierarchy, to identify subordinate members recruitedby said one member and to identify further subordinate members at eachsuccessive level; and wherein said determining step comprises saidcommission management processor retrieving member records from eachsubordinate level and computing said commission value on the basis-ofthe business volume recorded therein for each subordinate member.
 3. Themethod of claim 2, wherein said determining step further comprisescomputing said commission value on the basis of a schedule ofproportions associating proportional commission rates with eachsuccessive subordinate level, of the hierarchy.
 4. The method of claim3, wherein said determining step further comprises computing saidcommission value on the basis of a predetermined schedule of qualifyingbusiness volume values.
 5. The method of claim 4 wherein saiddetermining step further comprises retrieving and consulting saidschedule of qualifying business volume values to determine at least oneof (i) a threshold business volume value for payment of a commission tosaid one member, and (ii) identifying the number of successivesubordinate levels from which subordinate member records will beretrieved to determine the commission value.
 6. A method of distributingcommissions to promote use of a non-cash payment device, comprising thesteps of: organizing an electronic database to contain member records,each member record identifying a bearer of the non-cash payment device;establishing a hierarchy of relationships among the member records, andstoring positional data in the electronic database in association withthe member records; operating a purchase processing terminal to record apurchase by one of the members bearing the non-cash payment device bythe steps of: (a) establishing an internet connection between a userterminal and a merchant server; (b) entering purchase data into the userterminal; and (c) transmitting the purchase data via the merchant serverto an authorization processor; electronically transmitting transactiondata from the purchase processing terminal to a commission managementprocessor connected with the electronic database; operating thecommission management processor to determine, on the basis of thetransaction data, a business volume value, and to record the businessvolume value in a member record identifying said one member; determininga commission value for said one member on the basis of business volumevalues recorded in other member records and on the basis of thepositional data relating said one member with the other members in thehierarchy; and effecting a monetary payment in the amount of thecommission value on behalf of one member to a designated sponsor.
 7. Themethod of claim 1 wherein the non-cash payment device is one of a creditcard and a debit card, said non-cash payment device comprisingmagnetically-encoded indicia identifying said one member thereon, theoperating step comprising converting said magnetically-encoded indiciainto electronic purchase data for transmission to the debitauthorization processor.
 8. A method of promoting a non-cash paymentdevice, comprising the steps of establishing hierarchical relationshipsamong a plurality of members bearing non-cash payment devices; recordingthe hierarchical relationships established among the members aspositional data within an electronic database maintained by a commissionmanagement processor; conducting electronic purchase transactions by themembers using the non-cash payment devices via an internet connection toa merchant server, and electronically transmitting purchase data to thecommission management processor; determining by the commissionmanagement processor, a commission value for each member on the basis of(i) the purchase data pertaining to the electronic purchase transactionsmade by other members, and (ii) the positional data relating each memberto the other members in the electronic database; and effecting amonetary payment in the amount of the commission value.
 9. The method ofclaim 8 comprising the step of effecting the money payment to adesignated sponsoring organization.
 10. The method of claim 9 whereinthe sponsoring organization is a charitable organization.
 11. A methodof distributing commissions to promote use of a non-cash payment device,comprising the steps of: organizing an electronic database to containmember records, each member record identifying a bearer of the non-cashpayment device; establishing a hierarchy of relationships among themember records, and storing positional data in the electronic databasein association with the member records; establishing an internetconnection between a member terminal and a merchant server; operatingthe merchant server to record a purchase by one of the members bearingthe non-cash payment device; electronically transmitting transactiondata from the merchant server to a commission management processorconnected with the electronic database; operating the commissionmanagement processor to determine, on the basis of the transaction data,a business volume value, and to record the business volume value in amember record identifying said one member; determining a commissionvalue for said one member on the basis of business volume valuesrecorded in other member records and on the basis of the positional datarelating said one member with the other members in the hierarchy; andeffecting a monetary payment in the amount of the commission value tosaid one member.
 12. The method of claim 2 wherein the purchaseprocessing terminal is a point of sale terminal.
 13. The method of claim1 wherein the transaction data comprises purchase data.
 14. The methodof claim 1 wherein the transaction data comprises discount data.
 15. Themethod of claim 2 wherein the member is a distributor.
 16. The method ofclaim 6 wherein the non-cash payment device is a debit card.
 17. Themethod of claim 6 wherein the non-cash payment device is a credit card.18. The method of claim 8 wherein the non-cash payment device is a debitcard.
 19. The method of claim 8 wherein the non-cash payment device is acredit card.
 20. The method of claim 11 wherein the non-cash paymentdevice is a debit card.
 21. The method of claim 11 wherein the non-cashpayment device is a credit card.